The NFL’s TV rights negotiations are about to HEAT UP. Standing in the way is the collective bargaining agreement (CBA) between the league and the players, which the NFL reportedly hopes to wrap in the next few weeks (despite the CBA running through the 2020 season, or another 18 months). According to today’s WSJ, the NFL wants to lock down a new deal ASAP, as ratings were strong this year on the back of young new stars – plus the league wants to get in front of any potential economic downturn or the 2020 Presidential election, which could dampen ratings and hurt its negotiating leverage (i.e. ratings fell 8% in 2016). From the studios’ perspective, we think getting a deal done sooner rather than later would remove an overhang for the stocks – as some investors still question if a meaningful portion of the rights will go to digital players (we strongly disagree).
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The hottest names this week were ETM (866 bps better than the S&P), MDP (652 bps), NFLX (375 bps), SSP (299 bps), and GTN (199 bps).
We had a chance to tour ETM’s Studio down in TriBeca with a group of investors, followed by meetings with management (CEO CEO David Field, CFO Rich Schmaeling, Chief Digital Officer J.D. Crowley and NY Regional President, Susan Larkin). Our biggest takeaway is how the narrative for the company has finally taken a turn. We didn’t get a single question about USTN or legacy CBS Radio stations. Rather, investors were most interested in ETM’s multi-platform audio strategy – i.e. how ETM plans on integrating its newly acquired podcast platform with its core business, radio.com and its analytics group – along with capital allocation (some thought ETM should be buying back more stock) and the 2020 political opportunity.
The hottest names this week were BBGI (893 bps better than the S&P), CABO (628 bps), OUT (521 bps), NFLX (455 bps), and LAMR (272 bps).
The hottest names this week were GTN (797 bps better than the S&P), SSP (753 bps), TGNA (695 bps), SBGI (623 bps), and NXST (140 bps).
This morning (1/15), Standard General, one of TGNA’s largest holders with 9.7% ownership of total equity, released a public letter to shareholders expressing its intent to nominate four directors to TGNA’s Board after failing to reach a “consensual solution” with the co.’s mgmt. and Board. This is a departure from the 2 Board seats Standard General requested behind the scenes, as reported by Bloomberg in October 2019. We remind you that the article also suggested that Standard General asked TGNA to “launch a strategic review, including a possible sale of the company” – which at the time, we took to mean a possible sale to Apollo given the speculation of the tie-up from various trades.
Last Tuesday (1/7), TGNA pre-announced Q4 results, which came nicely ahead in both revenue and adj. EBITDA (~300-400bps higher in revenue and 700-900bps higher in adj. EBITDA). Specifically, mgmt. guided Q4 revenues to be “in the range of $688-693MM” (vs. our prior $665MM), and adj. EBITDA to be between $225-230MM (vs. our prior $209MM). Importantly, the revenue range of $688-693MM implies as-reported Y/Y growth of 7-8%, higher than the “up MSD” guide provided on its Q3 print. This confirmed CFO Victoria Harker’s comments at an investor conf. (12/3) stating “we are very comfortable, very bullish about our fourth quarter numbers even since the time of our earnings call.” Our sense is that political contributed to the lion’s share of the beat – esp., on the heels of Bloomberg’s entrance into presidential primaries – while core came in a bit better than expected as well.
As many of you have already heard, Marci has taken the plunge and left Wall Street after an exemplary 17 years to join Comcast as Senior Vice President, Investor Relations. We wish her the absolute best of luck in this new chapter of her career.
As we have done in every even-numbered year since 2002 (which is exactly when Marci entered the sell-side at the young age of 17), we are digging into the upcoming political cycle to determine which geographies are likely to have the most hotly contested races; and which of our broadcast/O&O companies have the highest exposure to such hotly contested races.
The hottest names this week were IHRT (953 bps better than the S&P), TGNA (304 bps), FOXA (276 bps), CHTR (95 bps), and BBGI (81 bps).
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